$650 Million Into a Headwind
Dragonfly Capital has closed its fourth fund at $650 million, as of February 17, 2026, making it one of the largest crypto-native venture raises of the year. The timing is what makes this remarkable: Bitcoin has lost roughly half its value since its October highs, the Crypto Fear & Greed Index recently hit its lowest reading ever recorded, and institutional crypto funds have been bleeding billions in outflows for four consecutive weeks.
Rob Hadick, one of Dragonfly's four managing partners, described the current crypto venture landscape as a "mass extinction event." He then raised $650 million into it. The fund was originally targeting $500 million, according to earlier reporting, meaning Dragonfly oversubscribed by 30 percent even as dozens of crypto-focused VCs have shuttered or pivoted to AI.
The firm's four-partner structure includes Hadick (fintech specialist, formerly of hedge fund GoldenTree), Haseeb Qureshi (the firm's most public-facing voice, former Airbnb engineer), Tom Schmidt (DeFi specialist, former 0x product lead), and Bo Feng (founder with deep ties to the Asian tech ecosystem). Together, they have built one of the few crypto VC firms that can still command institutional allocations when the market is in full retreat.
The Fund III Track Record That Made This Possible
Dragonfly's ability to raise $650 million during a bear market did not come from optimism alone. It came from a Fund III portfolio that included some of the cycle's biggest winners before they became consensus picks.
Ethena, the synthetic stablecoin protocol, was a Fund III bet. Ethena went on to raise a $100 million Series B with participation from Franklin Templeton and Fidelity, and its token now carries a market capitalization of approximately $6.3 billion. Polymarket, the prediction markets platform that has since crossed 688,000 monthly active users, was another early Dragonfly position. Other Fund III portfolio companies include Avalanche, Bybit, Matrixport, Amber Group, and Rain (the issuer infrastructure company that now powers Avici's crypto-backed credit card).
This track record placed Dragonfly in the same competitive tier as Andreessen Horowitz's crypto arm and Paradigm, firms that historically dominated crypto venture dealmaking. The difference is that Dragonfly achieved this primarily through crypto-native conviction rather than multi-sector diversification.
A Fintech Thesis, Not a Web3 Bet
The most revealing aspect of Fund IV is not the size. It is the thesis. According to Fortune's exclusive reporting, Dragonfly has deliberately pivoted away from categories like Web3 gaming, which absorbed billions in VC capital during the 2021-2022 boom only to produce minimal consumer adoption. Instead, Fund IV is targeting what the firm characterizes as "fintech" built on crypto rails.
The focus areas include stablecoins, credit and spending products, tokenized money market funds, and on-chain financial infrastructure. This is a bet that crypto's value proposition is converging with traditional finance rather than replacing it, a thesis that aligns with the recent wave of institutional integration: BlackRock bringing BUIDL to Uniswap, Apollo entering DeFi lending via Morpho, and Silicon Valley Bank declaring 2026 the year crypto goes mainstream.
For Dragonfly, the pivot reflects a pragmatic read of where revenue is actually generated in crypto. Stablecoin transaction volume now dwarfs most traditional payment networks. Crypto card products are proliferating across exchanges and DeFi protocols. Tokenized treasuries have crossed $17 billion on Ethereum alone. The money is following the infrastructure that connects crypto to everyday spending and saving, not the speculative token launches.
What Founders and LPs Should Watch
For founders, Dragonfly's $650 million deployment signals that early-stage crypto funding has not dried up entirely. It has concentrated. The firms that survived, and specifically the ones that generated returns for LPs during the downturn, are now the only game in town. Dragonfly's ability to oversubscribe by $150 million suggests that institutional LPs still want crypto exposure, they just want it through managers with proven track records rather than the spray-and-pray approach of 2021.
For LPs in other crypto funds, the Dragonfly close creates competitive pressure. Firms that have been sitting on uncommitted capital now face a choice: deploy into a market where valuations have compressed significantly, or miss the vintage year that bear-market funds historically outperform. The data consistently shows that venture funds raised during downturns (2009, 2018, 2022) produce the highest multiples because they buy at depressed valuations and sell into recoveries.
The $650 million also puts Dragonfly in a position to lead Series A and B rounds that other funds cannot. In a market where many crypto VCs have between $50 million and $200 million under management, Dragonfly can write checks large enough to set terms and take board seats at the companies most likely to define the next cycle.
The Extinction Around Dragonfly
Hadick's "mass extinction" comment was not hyperbole. Crypto VC funding has collapsed from its 2021 peak, with total annual investment falling by more than 70 percent. Dozens of funds that launched during the bull market have either wound down, pivoted to AI, or stopped making new investments entirely. The firms that remain active are operating in a fundamentally different environment where token launches no longer guarantee liquidity events and the path to returns requires genuine product-market fit.
This consolidation benefits Dragonfly directly. With fewer competitors, the firm sees more deal flow and faces less price competition for the best companies. It also means that portfolio companies funded by Dragonfly are less likely to face the dilutive pressure of dozens of follow-on investors all chasing the same deals.
For the broader crypto ecosystem, the extinction of marginal VCs is a net positive for product quality, even as it means less total capital flowing into the space. The companies that do get funded now must clear a higher bar for revenue, users, and technical differentiation. In the stablecoin payments sector, the self-custody wallet space, and the on-chain credit market, that higher bar should produce better products for end users.
The Contrarian Conviction Play
Dragonfly's $650 million close lands at an inflection point. The bear market has shaken out tourists, compressed valuations, and concentrated capital into the hands of a few survivors. The firm's pivot toward fintech and stablecoin infrastructure over speculative token plays suggests a maturation of the crypto VC thesis that mirrors what happened in traditional tech venture after the dot-com bust: the firms that funded the boring infrastructure (AWS, Stripe, Plaid) during the downturn ended up defining the next decade.
Whether Dragonfly's Fund IV delivers the same outsized returns as Fund III depends on execution and timing. But the willingness to raise $650 million while publicly describing the market as an extinction event sends a clear signal: the sharpest crypto-native capital sees this downturn as a buying opportunity, not a reason to sit on the sidelines.
FAQ
How much did Dragonfly raise for Fund IV? Dragonfly closed its fourth fund at $650 million, oversubscribing its original $500 million target by 30 percent.
What is Dragonfly investing in with Fund IV? The firm is focusing on fintech built on crypto rails, including stablecoins, credit and spending products, tokenized money market funds, and on-chain financial infrastructure. It has moved away from categories like Web3 gaming.
Who are Dragonfly's managing partners? The firm has four managing partners: Rob Hadick (fintech, formerly GoldenTree), Haseeb Qureshi (public ambassador, formerly Airbnb), Tom Schmidt (DeFi, formerly 0x), and Bo Feng (founder, Asian tech ecosystem).
What were Dragonfly's biggest Fund III wins? Ethena (synthetic stablecoin, now $6.3B market cap) and Polymarket (prediction markets, 688K monthly active users) were two of the highest-profile successes. The portfolio also included Bybit, Avalanche, Rain, and Matrixport.
Why is a bear market a good time to raise a VC fund? Venture funds raised during market downturns historically outperform because they invest at compressed valuations and exit during subsequent recoveries. The reduced competition for deals also allows bear-market funds to secure better terms.
Overview
Dragonfly Capital closed a $650 million fourth fund on February 17, 2026, oversubscribing its $500 million target while its own partner Rob Hadick described the crypto VC landscape as a "mass extinction event." The raise is one of the largest crypto-native VC closes of the year and reflects both the firm's Fund III track record (Ethena, Polymarket, Bybit) and a deliberate pivot toward fintech infrastructure, stablecoins, and tokenized finance. With dozens of crypto VCs shuttering or pivoting to AI, Dragonfly's oversubscription signals that institutional LPs still want crypto exposure but are concentrating it through proven managers rather than spreading it across unproven funds.
Recommended Reading
- Silicon Valley Bank Declares 2026 the Year Crypto Becomes Core Financial Infrastructure
- Apollo Follows BlackRock Into DeFi With a 90 Million Token Morpho Deal
- Ethereum Tokenized RWA Market Crosses $17 Billion After a 300 Percent Year-Over-Year Surge
